Why the Rich Take More Risks

Wall Street Journal

Do the wealthy take more risks because they are wealthy, or are they wealthy because they take more risks?

Both might be true. Yet a new study suggests that larger wealth may be more of a cause of risk-taking than a result. The study, by Barclays Wealth, polled people with $1.5 million or more in investible assets. It found that those with $15 million or more in wealth were more likely than the lesser millionaires to agree with the statement that “I buy and sell investments more than I should.” They also were more likely than those with $1.5 million or more to agree with the statement that “to do well in financial markets you have to buy and sell often,” and that “I attempt to strategically time the market as opposed to adopting a buy and hold strategy.” Granted, this is a survey buy a wealth-management firm. And wealth-management firms like active traders more than plodding buy-and-holders. Yet Barclay’s says the hyper-active rich traders probably are trading more than they should. “Having much more money to trade with leads one to trade too much,” the survey said. Indeed, the richest people in the survey are more likely to agree with the statement, “I wish I could take a more disciplined approach to my finances.” Not surprisingly, millionaire men take far more risks than millionaire women, and those who earned their fortunes in real estate took more risks than entrepreneurs or executives. By region, Asians took the most risks. Do you think the rich are rich because they take risk, or do they take more risks because they are rich?

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